Handspring ( HAND) gave investors the what-for Monday afternoon, announcing the U.S. rollout of its Treo, a combination phone and Palm OS-run personal digital assistant. The handheld maker has seen its shares slashed by 42% in the past four weeks, since its quarterly results on Jan. 15 when it said a component glitch could put a hitch in Treo's production ramp. Lo and behold that problem was solved, Handspring delivered the Treo smack in the middle of its originally anticipated launch period, the first quarter of 2002, and the stock soared 34% in Monday trading to close at $5.90.
"I think people were expecting them to release the product when they announced earnings; that was the big issue," says CIBC World Markets analyst Tom Sepenzis. "When they talked about a component issue, everyone blew it out of proportion. We're in a time when everyone tends to disbelieve, so they beat up the stock." The Treo is a handheld computer and phone built to run on the GSM standard for wireless networks that is popular in Europe and Asia -- where Handspring launched the Treo in the past few weeks. GSM is only beginning to become prevalent in the U.S. as mobile-phone carriers update their networks for the data revolution ahead. Cingular has an all-GSM network and was on board as a Treo partner when the product was announced in October, and on Monday, Handspring provided a bonus launch surprise by announcing that another GSM outfit, VoiceStream, would also carry the device. The Treo will sell for a subsidized price of $399 to new buyers who sign up for Cingular or VoiceStream phone coverage, or will go for a $549 tab to customers who already have wireless service and just want the new phone. Handspring is taking orders for the Treo on its Web site for delivery in one to two weeks, and will have models available in its retail sales channel in March. J.P. Morgan's Paul Coster thinks the schedule gives Handspring "a little bit of maneuvering room. Rather than ramping up channel inventory and their own inventory before they have really tested out the market, this way they can do a slow ramp." Either way, skittish investors will be pleased. Handspring's mention of component issues in its quarterly conference call had the market worried that Handspring would significantly delay the Treo. Joe Sipher, Handspring vice president of product marketing, explains that the glitches mentioned in January were a one-component issue, not several components, and have been resolved. "We are really hitting our original time frame. When we announced back in October, we said we'd be shipping in the first quarter," Sipher explains. "Somehow people gravitated to January and started thinking, 'you're late.' " Instead, Handspring is back ahead of its closest competitors in what will be a highly competitive market for the next generation of wireless communications.